Horizons Newsletter – Week 48 // 2019

Horizons is a bi-monthly Dasym Research initiative to show you how the Dasym themes have been in the news. We publish the Horizons on our website and as an email newsletter. If you wish to receive the email, please contact Investor Relations.
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Singles’ spending spree
The eleventh edition of Singles day on November 11th broke record sales and ended as  the world’s largest e-shopping day. Alibaba, the creator of this ‘anti-valentine’s day’ celebration, generated an estimated $38bn in sales (2018: $31bn). The event, however, is not limited to Alibaba. Its rivals also offered Double 11 discounts. Moreover, it is increasingly becoming an international event; ecommerce platforms in Southeast Asia and even some in the West joined the fray. In China, Alibaba and its competitors benefitted from China’s digital consumption culture, driven by the country’s post-90s generation, which comprises 16% of China’s population today. Nevertheless, geopolitical uncertainties continue to put pressure on growth. As a result, China’s major online companies including Alibaba, Tencent and Meituan-Dianping, are increasingly shifting their focus to Southeast Asia given the high growth rates in the economies across this region and their tech-savvy populations. Alibaba, for instance, is already the number one online market place in Thailand, Malaysia, Philippines, and Vietnam. Beyond Southeast Asia, Chinese digital platforms are also massively popular in India. So, new markets could keep the Chinese growth engine going.

U.S. military retrenchment creates a strategic space for emerging regional powers
This month, the Trump administration demanded that South Korea increases its annual payments for U.S. defense protection by more than 500%. In response, talks about this Special Measures Agreement broke down, undermining one of America’s longest (since the Korean War) and most important military allegiances in the Pacific region (it stations 28,000 U.S. troops close to China). The development is symptomatic of two broader trends. One is the renegotiating and restructuring of U.S. military commitments across the world to reduce America’s “imperial overstretch”, while other countries increasingly perceive the U.S. as an unreliable defense partner and want to become more independent. Currently, the U.S. has over 700 military bases in over 70 countries that might fear America’s military retrenchment (e.g. Japan, Philippines, Germany, Eastern European alliances, NATO). Emerging regional powers rush to fill in the power vacuum that the U.S. leaves in its wake, for example by building new institutions (e.g. Russia’s Eurasian Economic Union), boosting infrastructure plans (e.g. China’s Belt and Road Initiative), and developing new regional strategies (e.g. India’s Look East policy).

Ghost kitchens are changing the restaurant model
Driven by the on-demand economy and the shift to off-premise dining, a new type of restaurant has started to emerge. These restaurants have no dining room, but offer their service online and enable customers to order through third-party delivery services. Moreover, some of these companies turned their kitchen into a third party service, also known as ghost, dark or cloud kitchen. Venture capital funded startups such as Kitchen United, CloudKitchen, and Keatz, offer restaurant owners fully equipped kitchens under one roof, set for the preparation of delivery-only meals. As the cloud restaurant concept is still taking shape, traditional restaurants, food chains (Starbucks, McDonalds) but also third–party delivery services (UberEats, Deliveroo) are testing the concept. This model provides restaurateurs with immense opportunities, for instance, to operate different restaurant brands from the same kitchen to capture new demand. Food delivery companies could benefit as well from operating a cloud kitchen. Providing the kitchen and the logistics will give them even more data on consumer behavior, which might become the most valuable asset to harvest from the market.